What your credit file and credit score really means
This may come as a surprise, but in real-world terms to lenders, your credit score means very little…
Why? Because your ‘credit score’ is simply a number generated by Credit Reference agencies such as Experian, to show a very basic summary of your current financial position. This may be handy to you for an ‘at a glance’ view of your credit file, but this is NOT the same criteria used by lenders.
They will have their own scoring system which we, as consumers, will never get to see.
Experian rank their credit score from 0 to 999
Equifax rank their credit score from 0 to 600
CallCredit rank their credit score from 1 to 5
As you can see from the above, there is already a discrepancy between scores and whether one is right or wrong in regards to what lenders see.
In short, it’s not your Credit Score which is most important, but your Credit Record which is what lenders will assess when deciding whether to offer you credit and is what should be treated with the utmost care and importance.
Every time we take out credit with a lender, whether it is a store card, a hire purchase, a credit card or loan, this is registered on our Credit Record and the conduct on these accounts, along with other personal details, gives a much more in depth picture of how reputable and trustworthy we are as a potential borrower.
When we make an application, there are also additional things taken into consideration by the lender such as whether you are on the Electoral Roll, whether you have had missed or late payments now or in the past, what your overall indebtedness is (how much money you owe altogether) and whether you have a solid history of repayments.
Why doesn’t every lender treat me in the same way?
The short answer is that every lender has their own criteria of what makes a potentially good customer and their risk management is based on this.
Some companies are happy to take customers who have had an inconsistent financial history, but this may be reflected in the interest rates offered. Some companies have been known to outright refuse credit because of 1 single missed payment on a phone bill 4 years ago.
There really is no set rule.
The most important thing is that you make repayments in full and on time. Stick to this simple rule and you will have the foundations of building (or re-building) a good credit history.
It is also important to get registered on the Electoral Roll (a topic which we covered in another blog) and to also consider whether you are financially linked to anyone with a poor credit history. If you are linked by way of a joint account or mortgage, then that person’s poor score could have an adverse effect on your own.
A guarantor loan might be ideal for someone with bad credit. It does not matter if you have had CCJ’s, defaults or missed payments, all that is required is that you can afford your monthly payments and you have a guarantor that trusts you. In the event that you fail to make a repayment, then your guarantor will have to make them for you. (44.9% APR Representative Fixed). For more information about bad credit and Guarantor loans visit our dedicated Bad Credit page.
To see our own FAQ as a potential borrower (and for your Guarantor) please check out our Frequently Asked Questions page.
Alternatively, if you think you may be interested in a TFS Loan, please give us a call on the number below and one of our friendly staff will be more than happy to discuss the process with you.
TFS Loans are specialist Guarantor Loan lenders. A Guarantor Loan is a form of loan that requires someone to act as the Borrower’s Guarantor. We offer Guarantor Loans from £1,000 to £15,000, over 1 to 5 years.